Economy

There were no expectations at the beginning of the year that the European Central Bank would cut interest rates. But now traders believe it will actually reduce its rates, which are already below zero, a further three times. Cuts are also expected from Japan and Canada.

The old, pre-crisis view was that this was tantamount to insanity: there was a “zero bound to interest rates” which meant that they could never enter negative territory. The reason? People would simply not put up with them, and would pull their cash out of banks and hold notes and coins, which of course pay zero interest rates (and therefore come with an opportunity cost when rates are high but start to look attractive when interest rates fall below zero). In extremis, there would even be a run on bank accounts.

​Not only do people use multiple reasons for doing something to convince themselves, but also to convince others. Recently Bloomberg borrowed my work (without citing) to discuss the Crypto-E-dollar. My piece was a warning, but Bloomberg portrayed the E Dollar as a viable solution strictly for economic reasons. Today they ran a new story on banning high denomination cash to aid law enforcement. They cited a paper done by a Harvard economist, Peter Sands, entitled Making it Harder for the Bad Guys: The Case for Eliminating High Denomination Notes. Here is an abstract of the paper.

Specifically, numerous people seem to think it is still 2008. Wish that it were so – we’d be eight years younger. It all started on 24 August 2015, when two publications apparently discovered independently of each other that is was no longer 2008 and decided that this information should be urgently imparted to the rest of humanity. It all started with marketplace.org admonishing its readers to engage in mnemonic exercises so as not to forget...

The so-called dual mandate in the Federal Reserve Act is generally seen as granting the Fed broad authority to do what it sees necessary to obtain those goals. In central banking, this is known as “instrument independence.” Congress sets the goals, but the Fed is free to determine where to put rates in order to meet the goals. There are limits to this independence, however. For example, the Fed cannot buy stocks (unlike the Bank of Japan, which can) even if it believes doing so would boost employment.

The chart below shows that wages, adjusted for inflation, have been steadily declining for decades. This illustrates the systemic problem we have as a nation. Wages have increased and decreased along with the vagaries of economic cycles, but they have steadily made lower highs and lower lows. Instead of responding with traditional methods of lower taxation to compete in the global marketplace, the government has chosen to keep taxation high relative to other countries, even while other countries lowered taxation. That made the wage disparity problem, and U.S. economic competitiveness, worse.

Despite falling oil prices and stimulative monetary policy, Italian GDP ground to a halt at just 0.1pc in the last quarter of 2015, falling below analyst expectations of a 0.3pc expansion. It means the Italian economy grew by just 0.6pc last year having barely emerged from its worst slump since the Second World War in 2014.

I’m tired of urban folks looking into a camera and saying they can’t find an alternative to the supermarket. I’m tired of fast food outfits saying they can’t find enough ecological food. I recently fielded a set of questions from a representative for four nearby universities who wanted to buy non-industrial food but said it could never be produced in enough quantity. Suddenly these big buyers have a caveat for their student agitators: “we can’t find enough.”

“Malformations detected in thousands of children from pregnant women living in areas where the Brazilian state added pyriproxyfen to drinking water is not a coincidence, even though the Ministry of Health places a direct blame on Zika virus for this damage, while trying to ignore its responsibility and ruling out the hypothesis of direct and cumulative chemical damage caused by years of endocrine and immunological disruption of the a acted population,” PCST said.

Gold & Silver

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SÃO PAULO--Economists raised their inflation outlook for Brazil for this year, despite the continued expected deterioration of country's economy, as the monetary authority is expected to keep its benchmark interest rate unchanged. Brazil's official ...

Concern over borrowers' ability to service debt has weighed on Chinese lenders, with shares of the nation's four largest banks trading at valuations at least 35 percent below a gauge of their emerging-nation peers. China's ... Should the Chinese ...

Edwards on Thursday juxtaposed Louisiana's finances when Jindal took office in 2008 - when the state enjoyed a $1 billion surplus - to today, when the state is facing a looming $2 billion projected deficit. The budget problems in Louisiana, a big oil ...

Edwards does want to increase income taxes in order to plug the nearly $2 billion deficit the state must plug for next year. As of now, the Edwards administration hopes to achieve many or all of these changes in the next three weeks. However, the ...

...Total losses from debt defaults could be four times U.S. losses in the 2008 crisis. And that is just the beginning.Next week, we’ll explain why… and why Trump and Sanders are getting so much of the millennial vote. In the meantime, here’s an essay from the archives…

Convenient Beliefs

[Ed. note: Originally published August 2, 2005]

People come to believe whatever they need to believe when they need to believe it. Recent studies of voting patterns confirm the obvious. Zombies vote for higher taxes. Cronies vote for lower taxes. All believe they are voting for matters of principle.

Alan Greenspan believed strongly in gold – until he became a central banker. Then he believed he could do a better job than gold. Or at least he pretended to. It was a job requirement. A priest who didn’t believe in the resurrection would be useless. So would a plumber who didn’t believe in using a wrench.

Cash under the mattress is looking a little bit more in vogue now. Real estate, commodities, equities, bonds, oil , gold are losing their sheen. Old Frank's words are relevant, but somewhat un-reassuring is today's economic environment. "Unhappy Days are here again" may be become #1 on the top ten.

Just received my new fangled micro-chipped debit card from the ol' bank. Along with a little note saying that my "old school" regular card was being deactivated for "my safety". Called 'em up and asked if they wouldn't mind if I just used the old one..."no Sir, that card is too dangerous. Terrists and criminals might take advantage and whatnot".

A little while later I was fixin' up some fine bacon...like to put it in the ol' microwave for a few minutes before ploppin' it on the griddle. Helps even out the cookin'. Wouldn't you know it, I mixed up that thar plate of bacon for that new fangled debit card.

Yeah, I know that it's only so that the ATMs can count the 20s, but Andrew Jackson is a Terminator cyborg. Stick a stack of 20s in their with the morning cup of coffee, and you'll find that terminator eye go kaplooie.

On the other hand, you may be poisoning yourself with heavy metals that you shouldn't.

I'd just say cut the card in half, and tell them to revoke it, if it's important to you.

Regarding ourselves, I specifically asked for no "wave" chip, but I'm fine with the "insert" chip.

A new German plan toimpose "haircuts" on holders of eurozone sovereign debtrisks igniting an unstoppable European bond crisis and could force Italy and Spain to restore their own currencies, a top adviser to the German government has warned.

"A speculative attack could come very fast. If I were a politician in Italy and I was confronted by this sort of insolvency risk I would want to go back to my own currency as fast as possible, going bankrupt,” he told The Telegraph.